A Tale of Two Stocks

It’s time for Google to resume its meteoric growth, Cramer says. It’s time it went to $600. Why not $1,000? At least that’s what it might be trading at if it had the same multiples as Amazon.com, a company with slower growth, smaller margins and fewer prospects.

Google Vs. Amazon

Google's ready to move again and if you're smart, you'll get on for the ride

Cramer thinks some analyst somewhere should recognize the glaring contrast between these two stocks soon enough. Amazon’s sales growth and operating margin are 33% and 4%, respectively. Google’s? 63% and 33%, respectively. Then there’s market competition. Amazon competes against almost the entire retail sector. Google battles only Microsoft and Yahoo!. Even though Google is the better, higher growth company, Amazon is still more expensive.

The multiples used to value these stocks also tell the story. The price-to-earnings multiple tells investors how much the Street is willing to pay for those earnings. It is earnings per share times multiple equals price. The higher the multiple, the more the Street’s willing to pay for the stock. Amazon is trading at a much higher multiple than Google across the board. For example, if GOOG was trading at the same level as Amazon’s estimates for next year’s earnings, the search giant would be worth $1,038 a share.

Bottom Line: The wait is over, Cramer thinks. Google looks like it’s ready to move again. You might want to get in for the ride.